Comment on the DWP’s ‘Strengthening TPR’s powers: notifiable events’ consultation.
25 Oct 2021
Commenting in response to the DWP’s Consultation on Strengthening TPR’s powers: notifiable events, which closes this week, Alistair Russell-Smith, Head of Corporate DB, Hymans Robertson, says:
"It is good to see that pension schemes are now higher up the corporate agenda when planning corporate transactions. This is not only as a result of these forthcoming notifiable events changes, but also due to the broader suite of new regulatory powers introduced earlier this month. Now the implications of corporate activity on the pension scheme have to be considered at an early stage, with potential mitigations thought through. If it’s left too late then this weakens the position for the employer, and probably puts the trustees and TPR in a stronger position when they do eventually come to assess the implications of the activity (which they will have to do under the new regime).
“We remain concerned, however, that the specific notifiable events proposals outlined in this consultation define ‘material’ corporate activity relative to the size of the employer, with no consideration of the size or funding position of the pension scheme. So for example, selling 25% of the business is a proposed trigger, but in practice this activity might not be an issue if the scheme is relatively small and the assets of the remaining 75% of the business continue to easily cover the pension scheme’s Section 75 debt. In contrast selling 20% of the business is not a proposed trigger, but this could be very material if the scheme is relatively large and this leads to a significant reduction in the scheme’s Section 75 debt coverage. DWP has a difficult job on its hands trying to define events in a way which is effective but also simple to calculate and operate. But it does seem that the proposed approach is such a blunt tool that is has the potential to capture events which are not material and miss events that are material.”